Air America files for bankruptcy

Red ink finally got the better of the nation's blue-state radio network.

Air America Radio filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on Friday in New York. The network said it would stay on the air while operating under Bankruptcy Court protection.

Since Air America's inception two years ago, the company, which had billed itself as a "progressive," unabashedly liberal oasis on the dial, has been plagued by management and financial problems. As recently as last month, the network's star commentator, Al Franken, complained publicly that his paychecks had stopped.

"By running such a poor business they did a disservice to liberal talk radio by making it seem like the problem was that they were liberal," said Michael Harrison, the publisher of Talkers Magazine, a talk-radio industry trade magazine. "Before you change the world, make sure you pay your bills."

Air America spokeswoman Jaime Horn said the filing became necessary after negotiations with one of the privately held company's founding creditors broke down.

Horn would not reveal the name of the creditor, but the company has had troubles with business partner MultiCultural Broadcasting Inc., which is a creditor to Air America's parent company, Piquant LLC.

The radio network trumpeted itself as a response to the cacophony of conservative radio voices such as Rush Limbaugh and Sean Hannity. Over time, its stable of on-air talent has included Franken, actress Janeane Garofalo and talk-show host Jerry Springer.

But Friday, in court records, the company's assets of $4.3 million were far outstripped by $20.3 million owed. Creditors included Franken, owed $360,749.

Air America will continue to receive funding from Democracy Allies LLC, an investor group that includes Robert Glaser, chief executive of RealNetworks Inc. who made his fortune as a Microsoft Corp. executive.

Glaser, who once served as chairman of Air America, holds a 36.7 percent stake in the company. Glaser resigned as director of the network's parent company Friday. Horn said Scott Elberg had been named as its new chief executive.

Elberg has been at the network since 2005. "Nobody likes filing for bankruptcy," he said in a statement. "However, this move will enable us to concentrate on informing and entertaining our audience during the coming months."

According to the filing, the network has lost money since it was founded in 2004, with a deficit of $13.1 million this year. In 2005, Air America's operating losses hit $19.2 million, up from $8.6 million in 2004.

The ride was bumpy for the New York City-based network before it even hit the airwaves, enduring changes in ownership, management, on-air lineups and even its name.

The network began as the brainchild of Chicago-area entrepreneurs Sheldon and Anita Drobny, longtime Democratic fundraisers, who -- weary of what they described as a conservative political monologue -- aimed to purchase radio stations and launch a left-leaning talk-radio network.

But in November 2003 they sold most of their stake in what was then dubbed Central Air to investors including Mark Walsh, onetime America Online executive and former Internet adviser to the Democratic National Committee, and New York venture capitalist Evan Cohen.

Plans to go live in time for the presidential primaries in early 2004 were pushed back, and the network finally debuted with Franken's show on March 31, 2004, on six stations. But two weeks later it was off the air in Chicago and Santa Monica, Calif., when MultiCultural Radio Broadcasting yanked the service because of a payment dispute.

Start-up funds for the network, reportedly about $20 million, turned out to be far less. Cohen, who at the time was also a director of the Gloria Wise Boys & Girls Club in the Bronx, transferred $875,000 from the nonprofit to Air America, according to the New York City Department of Investigation.

Before the network made it through its first few months, Walsh, Cohen and several other executives were gone.